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Investors: 4th quarter is here. Have you invested in tax-saving investments?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Tax-savings instruments have been a topic among many investors. Not only does this help diversify your portfolio and risk profile, but it also helps save on taxes. It is always considered to be a good idea to invest during the early quarters of the year in tax-saving instruments. However, you can always still invest in them. It is important that you have a clear understanding of your investment goals before going ahead and investing in any of these tax-saving instruments.
Tax-Saving Instruments
There are several tax-saving instruments that are available in India. Here are some of the best tax-saving instruments in the market.
1. Health Insurance Plans
One of the main tax benefits from the health insurance plan is the tax benefit under the Income Tax Act mentioned in Section 80C. You can also enjoy tax benefits under Section 80D as well on the premium amount that you have paid. The deductions on health insurance can be availed on premium payments up to Rs. 25,000. When it comes to senior citizens, the premium limit is increased up to Rs. 50,000.
2. Unit Linked Insurance Plans
ULIPs are long-term investment plans that are mostly considered by many investors when continuous withdrawals are not needed. For ULIP plans, you will have to understand that there is a lock-in period during which you will not be able to withdraw your investment. With ULIPs, you can experience tax benefits on the premium amount invested in debt and equity markets.
3. Life Insurance Plans
It is important for every individual or taxpayer to have an active life insurance policy. While securing your family financially during the time of absence, you can also experience tax benefits with a life insurance policy. You can avail of tax benefits on your life insurance policy up to Rs. 1.5 Lakhs under the Income Tax Act mentioned in Section 80C. Moreover, in case of your unfortunate demise, there is also a benefit of a lump sum amount that will be offered to your beneficiary as a death benefit under Section 10(10D).
4. Public Provident Fund
With PPFs, you can experience tax benefits under Section 80C. With a PPF, it is important to remember that there is a 15-year lock-in period. Moreover, the investment amount that you require to start with a PPF also varies. You can invest between a range of Rs. 500 to Rs. 1.5 Lakhs. Moreover, PPF is considered to be one of the best tax-saving instruments.
5. Equity-Linked Tax Saving Scheme
ELSS is also a great tax-saving instrument if you prefer short-term plans compared to long-term plans. You can start by just investing Rs. 500 with an ELSS plan and further experience the tax benefits it offers. After your lock-in period is completed, you do not necessarily have to continue investing in this plan. This provides more flexibility compared to pension plans and health insurance plans.
6. Infrastructure Bonds
In case you receive a fixed income and fall under the fixed income category, then you can consider this risk-free tax saving instrument. Essentially, these bonds are offered by companies that fall under the infrastructure category. These companies are approved by the Government of India. If you would like to be considered for an income tax deduction, then your investment can be up to Rs. 20,000. You can then opt for income tax deduction under the Income Tax Act mentioned in Section 80C.
7. National Savings Certificate
This option of a fixed deposit service is offered by the Post Office. When it comes to an NCS, it is different from a fixed deposit offered by banks in the fact that an NCS offers lower returns on your investment. However, the safety of your investment is assured as this scheme is offered by the Government of India. When it comes to tax benefits, you can avail of them under Section 80C.
In a Nutshell
There are several tax-saving instruments that you can consider investing in. Plenty of options such as ELSS, health insurance plans, life insurance plans, infrastructure bonds, and many other options are available. You can choose one according to your financial capabilities and choice. Moreover, it is best to get started with investing in these instruments at the earliest to experience the most benefits.
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